What happened

Construction companyChicago Bridge & Iron (NYSE: CBI) is actually based in the Netherlands -- but wherever it started out, CBI stock is ending up much higher after a big earnings report today, closing the day up about 15.7%.

On Friday, CBI closed out the week with "beats" on both sales, which came in at $2.776 billion versus consensus estimates of $2.771 billion, and earnings, which came in at $1.20 per share versus an expected $1.17. The results were all the more pleasing given that, one year ago, CBI had reported a big $7.02 per-share loss, making Friday's news a welcome reversal.

So what

Advertisement

Beat or no beat, revenues actually declined 16.5% year over year in Q3. Additionally, new contracts won in the quarter amounted to just $2.7 billion -- a 32% drop from one year ago. This suggests that CBI investors may face the prospect of continued declines in revenues in quarters to come.

That said, management did confirm that it still has "$20 billion" worth of work in its backlog already. At its current rate of roughly $12 billion in annual revenues, that suggests the company will retain ample work to be done, which could keep it going while it waits for the pace of new contract wins to pick up.

Now what

While CBI isn't doing as much business this year as last, or winning as much new business either, management emphasized that "new awards, revenues, operating income and margins, and earnings per share all reached their highest points year-to-date." Revenues came in at roughly $2.7 billion in each of Q1 and Q2, and inched up to $2.8 billion in Q3. Meanwhile, earnings are showing an encouraging level of leverage, with net profits of $122 million earned in Q3 up 14% from Q1's $107 million level of profitability, even as revenues in Q3 exceeded Q1 revs by only 4%.

With GAAP profits still running negative for the past 12 months, CBI stock may not look particularly attractive at first glance. But its free cash flow is strong ($550 million over 12 months), its market cap low ($2.85 billion), and expressed as a ratio, CBI stock's price-to-free-cash-flow ratio of just 5.2 seems to fit the definition of "cheap."

Now, if the company can just start winning contracts at a faster rate, there's every possibility that investors' faith in this company, as expressed in today's wave of renewed buying, will be rewarded.

A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Fool contributorRich Smithdoes not own shares of, nor is he short, any company named above. You can find him onMotley Fool CAPS, publicly pontificating under the handleTMFDitty, where he currently ranks No. 324 out of more than 75,000 rated members.